Seattle Office Space News – November 2018

3/ December 2018

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of November 2018.

 

OFFICE DEVELOPMENTS

Unico has finally revealed the plans for the second building of the former PEMCO headquarters. The new building, called Yale and Harrison, is at 330 Yale and is being designed by Perkins + Will. The building will be nine stories, with 200,000 square feet of office, 1,500 square feet of retail and one level of underground parking. Unico is not currently marketing the building for prelease, so the current rumor is that Unico has already secured a full tenant. While Amazon occupies the other former PEMCO building (Yale and Thomas), it has not been revealed that Amazon has taken Yale and Harrison. Unico hopes to begin construction in the Second Quarter of 2019.

Seattle’s new Waterfront district is becoming more and more of a reality and developer Urban Visions is looking to cash in on this hot new market. They plan to start construction next year on an eight story development called The Jack. Located at 74 Jackson Street in Pioneer Square, the building will have 135,300 square feet of office space and some ground floor retail. Olson Kundig will be designing the project, and due to the tight market in Pioneer Square, no one expects the building to stay vacant for long.

Travel titan Expedia has finally revealed its plans for its massive new Seattle campus project in Interbay. After purchasing the 40 acres from Amgen in 2015, Expedia has been slowly applying for permits and work allowances, along with renovating the old Amgen buildings. The new campus will have room for 5,000 employees, giving Expedia room to grow as they currently only have 4,500 in the area.

Expedia’s campus is set to open in the fall of 2019, and will be designed around nature in a “biophilic” way with outdoor spaces, wide windows, plants and open vistas. Expedia also plans to begin construction on a brand-new 600,000 square foot building set to open in 2020. The workforce will begin to transfer over to Seattle, but since the majority of the employees live on the Eastside, Expedia is considering all manner of helpful measures to transport everyone. Shuttle services, rideshare options, new bike paths and complimentary ORCA passes are some of the solutions proposed to get everyone over to the new campus.

The Seattle Cancer Care Alliance (SCCA) has moved their expansion forward, bringing the project into focus. The 240,000 square foot project will more than double its current clinic’s size. The expansion team includes ZGF Architects and SiteWorkshop, a landscape architecture firm. The alliance’s expansion is yet another sign of the region’s growing medical and life sciences influence, and SCCA is not alone in expanding: UW Medicine, Allen Institute and others are also expanding their footprint in Seattle.

BUILDING SALES

Building sales were modest in November, with one only sale rumored to be in the works. Spanish retail magnate Amancio Ortega, cofounder of Inditex fashion group, has reportedly purchased the Amazon-leased Troy Block. The property is 811,500 square feet spaced between two towers. If the report published by Real Estate Alert is true, Ortega’s real estate firm Ponte Gadea paid between $740 to $750 million or roughly $911/foot for the Blocks. That would make the deal the largest in the region since the sale of Columbia Center in 2015.

OFFICE LEASES

Facebook is reported to have leased the entirety of the 333 Dexter project in South Lake Union. The 630,000 square foot project has two buildings, and was initially designed for biotech companies. This lease would increase Facebook’s already-large footprint in Seattle after the tech company first moved here in 2010. The lease has yet to be confirmed, and the project is due to open next summer.

Now that Amazon has chosen its other two headquarters, the question remains on whether or not they will sublease the entirety of Rainier Tower. Amazon has said it plans to complete all construction on its 12 million square feet of office space by 2020. However, it has not confirmed its intent to move into the 720,000 square foot Rainier Tower or whether or not it will sublease some or all of it to other tenants. Amazon originally floated the idea of subleasing Rainier Tower during the summer, when the Seattle City Council passed a tax that would negatively impact Amazon. The city has since repealed the tax but Amazon still remains quiet on its plans for Rainier Tower.

ECONOMY

The news is finally in: Amazon’s HQ2 will actually be split between two cities. Instead of the original plan to have a second headquarters with 50,000 employees, the headquarters will be split between Long Island City, New York and Crystal City, Arlington, Virginia.

This new twist in the plan will allow Amazon to recruit talent in both the New York area and in Washington DC, getting incentives from both metro areas and affecting the culture of two prominent cities. Amazon plans to begin hiring for both areas in 2019. In addition, Amazon will be putting an operations center in Nashville, Tennessee, which will have the capacity to hire 5,000 people.

Amazon’s new headquarters locations will come, of course, with millions of dollars in perks and incentives from each city. In Arlington, VA, Amazon will receive performance-based incentives like cash grants in exchange for creating jobs, and also will be funded by increased taxes on hotel rooms. In Long Island City, NY, cash grants will follow job creation, square footage of occupied buildings, and occupancy targets. For more details on these incentives, click here.

While some have worried that Amazon’s HQ2 will take away from Seattle, Mayor Jenny Durkan is not worried.  She calls the two separate headquarters, each with approximately 25,000 employees, “branch offices” and says it is “good news.” The idea is that even though Amazon is planting roots and resources in two other cities, it is not the same as an “equal” to Seattle.

If you are hoping that Amazon’s HQ2 announcement will depress the Seattle housing market, experts say you are out of luck. While Amazon is setting down roots on the East Coast, it is clear that they are far from leaving Seattle. Rather, it appears that they have simply “outgrown Seattle,” according to Windermere Real Estate chief economist Matthew Gardner. Seattle will still be Amazon’s world headquarters, and will continue to pull in talent and create jobs in the region. In addition, Amazon is far from the only company bringing people to Seattle. Tech giants like Google and Facebook have increasing footprints in the city, and the job market in the region is as strong as ever.

While Amazon may not contribute to a housing market cooldown, the market is cooling. Since this spring, when Seattle led the nation in house-price increases, the market has made quite a turnaround. Now, prices are falling faster here than they are anywhere in the country. Single family homes declined 1.3% in September, which followed a 1.6% drop in August and a 0.5% drop the month before. This rate of decline was last seen in 2011. Taken together, prices have fallen 3.3% over the last three months. Homes are sitting on the market longer, causing prices to decline. Prices are still high in the region, but buyer fatigue and flat rents have taken the drive and pressure off prospective home buyers.

The new Hyatt Regency in Seattle is set to open on December 10th, making its mark as the Pacific Northwest’s largest hotel. The gleaming white new skyscraper will have 1,260 rooms and 45 stories, and will have 103,000 square feet of meeting and events space. From its humble origins as a Greyhound bus station, the new hotel at 808 Howell Street is set to add an 8% share of the hotel rooms in the entire region. It plans to bill itself as the preeminent meeting and event location in the city.

ARENA

The NHL has worried that the new Key Arena renovation won’t be finished in time for the 2020-2021 season, but NHL Seattle has assured them that the renovations will be complete. The City of Seattle has granted Oak View Group a noise-variance permit which will allow them to continue construction through the night, which theoretically will allow them the complete on deadline. Both the league and NHL Seattle should have a firmer idea on whether or not an October 2020 deadline is feasible in mid to late 2019.

TRANSIT

Crews will be working full tilt to get the new Highway 99 tunnel open by February. During the three week closure in February, crews will need to remove a huge wall of “geofoam” bricks, each one 100 lbs. In addition to this removal, the crews will also need to remove the traffic barriers on both sides of the ramp, remove detours, and take down a temporary wrapped earth embankment wall.

Seattle Times’ Traffic Lab has collected questions from almost 600 readers regarding the demolition of the Viaduct, the new Highway 99 tunnel, tolls, and timelines. Some of the most crucial questions have been collected here and here.

OTHER NEWS

Trace the evolution of Amazon’s (literal) rise in the city skyline – along with the six years of work on the Highway 99 tunnel. The video, which is just 40 seconds long, shows the many cranes at work on Amazon’s HQ in South Lake Union. Watch towers sprout from the ground and the new Highway 99 tunnel appear suddenly in under a minute.

Written by // flinn

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